Litigation Release No. 18971 / November 16, 2004

SEC OBTAINS FINAL JUDGMENT OF PERMANENT INJUNCTION AND OTHER RELIEF AGAINST PHOENIX TELECOM, L.L.C.

The Securities and Exchange Commission (the "Commission") announced that on November 9, 2004, the Honorable Jack T. Camp of the United States District Court for the Northern District of Georgia, entered a final judgment of permanent injunction and other relief against Phoenix Telecom, L.L.C. ("Phoenix"). The order enjoins Phoenix from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Phoenix, which has been under the control of a court appointed receiver since shortly after the Commission filed this case, consented to the entry of the final judgment without admitting or denying the allegations of the Commission's complaint. The Commission withdrew its claims against Phoenix for disgorgement and civil penalties.

Phoenix, through the efforts of its codefendants, engaged in fraud in the offer and sale of unregistered investment contracts in a scheme involving pay telephone lease-backs. The Commission alleged that the defendants promoted a massive fraudulent scheme through the use of insurance agents and over the Internet, in which Phoenix raised more than $74 million from more than 2,000 mostly elderly investors. All of the individual defendants in this action have been permanently enjoined in earlier orders, and have been ordered to pay disgorgement and other relief.

In earlier orders, the Court concluded that the scheme was based upon purported investments in customer owned, coin-operated telephones offered and sold in units, involving a telephone, site lease, lease-back agreement and buy-back agreement, that constituted securities, and further concluded that no registration statement was filed with the Commission in connection with those securities. Phoenix was the source of lease payments on the telephones and was the insurer of the investment. Investors were not told that Phoenix was losing money, had a negative net worth, and was dependent on revenue from new investors to sustain its operations.